HCI - HCI Group Reports First Quarter 2021 Results
TAMPA, Fla., May 06, 2021 (GLOBE NEWSWIRE) -- HCI Group, Inc. (NYSE:HCI) , an InsurTech company with operations in insurance, software development and real estate, reported results for the quarter ended March 31, 2021.
First Quarter 2021 - Financial Results
Net income for the first quarter of 2021 totaled $6.1 million or $0.75 diluted earnings per share compared with $0.5 million or $0.07 diluted earnings per share in the first quarter of 2020. Adjusted net income (a non-GAAP measure which excludes net unrealized gains or losses on equity securities) for the quarter was $6.4 million or $0.77 diluted earnings per share compared with $4.2 million or $0.54 diluted earnings per share in the first quarter of 2020. This press release includes an explanation of adjusted net income as well as a reconciliation to net income and earnings per share calculated in accordance with generally accepted accounting principles (known as “GAAP”).
Consolidated gross written premiums of $125.8 million for the first quarter of 2021 were up 64.4% from $76.5 million in the first quarter of 2020. This increase was due to the growth of Homeowners Choice gross written premiums from $58.1 million to $81.0 million and the growth of TypTap Insurance Company gross written premiums from $18.4 million to $44.9 million.
Consolidated gross premiums earned of $130.9 million for the first quarter of 2021 were up 41.8% from $92.4 million in the first quarter of 2020. The increase was driven by the growth in Homeowners Choice gross premiums earned from $75.8 million to $102.1 million and the growth of TypTap gross premiums earned from $16.6 million to $28.8 million.
Premiums ceded for reinsurance for the first quarter of 2021 increased to $43.1 million from $30.7 million in the first quarter of 2020 and represented 32.9% and 33.3%, respectively, of gross premiums earned.
Net investment income was $4.6 million, compared with a net investment loss of $0.2 million in the first quarter of 2020. This increase was due to an increase in limited partnership income as well as a lawsuit settlement in the real estate division.
Net realized investment gains were $1.1 million compared with a net realized investment losses of $2.2 million in the first quarter of 2020.
Net unrealized investment losses were $0.3 million in the first quarter of 2021 compared with net unrealized losses of $4.8 million in 2020.
Losses and loss adjustment expenses were $45.8 million compared with $28.1 million in the same period in 2020. The increase was driven primarily by the growth in gross premiums earned.
Policy acquisition and other underwriting expenses were $23.1 million compared with $11.8 million in the same quarter of 2020. The increase relates to the growth in gross premiums earned.
Interest expense decreased to $2.1 million in the first quarter of 2021 compared with $3.0 in the first quarter of 2020 due to the early adoption of a new accounting standard requiring the reversal of discounts previously recorded to account for the cash conversion feature of the Company’s convertible debt instrument. As a result, interest expense no longer includes amounts representing the amortization of the discount.
The effective tax rate for the first quarter was 32.2% versus a rate of 16.7% for the first quarter of 2020. The increase in the effective tax rate was primarily due to the derecognition of deferred tax assets attributable to unvested restricted stock that was cancelled in the quarter offset by a decrease in the non-deductibility of certain executive compensation.
First Quarter 2021 – Other Events
During the first quarter of 2021, the Company repaid the $23.75 million outstanding balance of its revolving credit facility, leaving the full $65 million line of credit available to the Company as of March 31, 2021.
Long-term debt increased to $160.5 million in the first quarter of 2021 compared with $156.5 million at December 31, 2020. The $4 million increase did not result from new indebtedness but was caused by the early adoption of a new accounting standard that allows the reversal of the discount previously recorded to account for the cash conversion feature of the Company’s 4.25% convertible senior notes.
During the first quarter of 2021, the Company’s subsidiary, TypTap Insurance Group, Inc., completed a capital investment transaction with a fund associated with Centerbridge Partners L.P. As a result of this transaction, the Company recorded $85.9 million of redeemable noncontrolling interest on the balance sheet reflecting the cash increase of $100 million from the initial proceeds received from Centerbridge less $6.3 million of issuance costs and $8.6 million of fair value assigned to the warrants to purchase HCI stock that were granted as part of the transaction.
During the quarter, the number of common shares outstanding increased from 7,785,617 to 8,289,682. The increase is attributable to 100,000 shares issued to United Property & Casualty Insurance Company in connection with a renewal rights agreement as well as a net increase in the number of restricted common shares of 404,065.
Total equity increased to $217.6 million in the first quarter of 2021 compared with $201.1 million at December 31, 2020. The $16.5 million increase was primarily due to the $8.6 million of fair value assigned to the issued warrants and $5.4 million for HCI common stock issued to United Property & Casualty Insurance Company. Book value per common share (including noncontrolling interest) increased to $26.25 at March 31, 2021 compared with $25.83 at December 31, 2020.
Management Commentary
“We are reaping the benefits of decisions we made in previous periods,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “We expect to report more benefits as 2021 progresses.”
Conference Call
HCI Group will hold a conference call later today, May 6, 2021, to discuss these financial results. Chairman and Chief Executive Officer Paresh Patel, Chief Operating Officer Karin Coleman and Chief Financial Officer Mark Harmsworth will host the call starting at 4:45 p.m. Eastern time. A question-and-answer session will follow management's presentation.
Interested parties can listen to the live presentation by dialing the listen-only number below or by clicking the webcast link available on the Investor Information section of the company's website at www.hcigroup.com .
Listen-only toll-free number: (877) 545-0320
Listen-only international number: (973) 528-0016
Entry Code: 606423
Please call the conference telephone number 10 minutes before the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.
A replay of the call will be available by telephone after 8:00 p.m. Eastern time on the same day as the call and via the Investor Information section of the HCI Group website at www.hcigroup.com through June 6, 2021.
Toll-free replay number: (877) 481-4010
International replay number: (919) 882-2331
Replay ID: 40734
About HCI Group, Inc.
HCI Group, Inc. is an InsurTech company with operations in insurance, software development and real estate. HCI’s leading insurance operation, TypTap Insurance Company, is a rapidly growing, technology-driven insurance company that is expanding nationwide to provide homeowners and flood insurance. TypTap’s operations are powered in large part by insurance-related information technology developed by HCI’s software subsidiary, Exzeo USA, Inc. HCI’s largest subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., provides homeowners’ insurance primarily in Florida. HCI’s real estate subsidiary, Greenleaf Capital, LLC, owns and operates multiple properties in Florida, including office buildings, retail centers and marinas.
The company's common shares trade on the New York Stock Exchange under the ticker symbol "HCI" and are included in the Russell 2000 and S&P SmallCap 600 Index. HCI Group, Inc. regularly publishes financial and other information in the Investor Information section of the company’s website. For more information about HCI Group and its subsidiaries, visit www.hcigroup.com .
Forward-Looking Statements
This news release may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "estimate," "expect," "intend," "plan," "confident," "prospects" and "project" and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties. For example, the estimation of reserves for losses and loss adjustment expenses is an inherently imprecise process involving many assumptions and considerable management judgment. Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the company's business, financial condition and results of operations. HCI Group, Inc. disclaims all obligations to update any forward-looking statements.
Company Contact:
Rachel Swansiger, Esq.
Investor Relations
HCI Group, Inc.
Tel (813) 405-3206
rswansiger@hcigroup.com
Investor Relations Contact:
Matt Glover
Gateway Investor Relations
Tel (949) 574-3860
HCI@gatewayir.com
Media Contact:
Jordan Schmidt
Gateway Investor Relations
Tel (949) 386-6332
jordan@gatewayir.com
- Tables to follow -
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Dollar amounts in thousands)
| March 31, 2021 |
| December 31, 2020 |
| (Unaudited) |
| Assets |
| Fixed-maturity securities, available for sale, at fair value (amortized cost: $58,921 and $70,265, respectively) (allowance for credit losses: $579 and $588, respectively) |
| $ |
| 60,202 |
| $ |
| 71,722 |
| Equity securities, at fair value (cost: $45,968 and $47,029, respectively) |
| 49,800 |
| 51,130 |
| Limited partnership investments |
| 26,726 |
| 27,691 |
| Investment in unconsolidated joint venture, at equity |
| 680 |
| 705 |
| Real estate investments |
| 74,015 |
| 74,472 |
| Total investments |
| 211,423 |
| 225,720 |
| Cash and cash equivalents |
| 553,397 |
| 431,341 |
| Restricted cash |
| 2,400 |
| 2,400 |
| Accrued interest and dividends receivable |
| 595 |
| 588 |
| Income taxes receivable |
| 481 |
| 4,554 |
| Premiums receivable, net |
| 29,459 |
| 68,382 |
| Prepaid reinsurance premiums |
| 14,974 |
| 36,376 |
| Reinsurance recoverable, net of allowance for credit losses: |
| Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively) |
| 10,652 |
| 14,127 |
| Unpaid losses and loss adjustment expenses (allowance: $73 and $85, respectively) |
| 61,070 |
| 71,019 |
| Deferred policy acquisition costs |
| 40,466 |
| 43,858 |
| Property and equipment, net |
| 13,026 |
| 12,767 |
| Right-of-use-assets - operating leases |
| 3,571 |
| 4,002 |
| Intangible assets, net |
| 11,255 |
| 3,568 |
| Other assets |
| 63,784 |
| 22,611 |
| Total assets |
| $ |
| 1,016,553 |
| $ |
| 941,313 |
| Liabilities and Equity |
| Losses and loss adjustment expenses |
| $ |
| 205,773 |
| $ |
| 212,169 |
| Unearned premiums |
| 264,305 |
| 269,399 |
| Advance premiums |
| 24,291 |
| 11,370 |
| Assumed reinsurance balances payable |
| 88 |
| 87 |
| Reinsurance payable on paid losses and loss adjustment expenses |
| 2,317 |
| — |
| Accrued expenses |
| 14,404 |
| 10,181 |
| Deferred income taxes, net |
| 10,052 |
| 11,925 |
| Revolving credit facility |
| — |
| 23,750 |
| Long-term debt |
| 160,539 |
| 156,511 |
| Lease liabilities - operating leases |
| 3,579 |
| 4,014 |
| Other liabilities |
| 27,705 |
| 40,771 |
| Total liabilities |
| 713,053 |
| 740,177 |
| Commitments and contingencies |
| Redeemable noncontrolling interest |
| 85,892 |
| — |
| Equity: |
| Common stock, (no par value, 40,000,000 shares authorized, 8,289,682 and 7,785,617 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively) |
| — |
| — |
| Additional paid-in capital |
| — |
| — |
| Retained income |
| 216,086 |
| 199,592 |
| Accumulated other comprehensive income, net of taxes |
| 1,405 |
| 1,544 |
| Total stockholders’ equity |
| 217,491 |
| 201,136 |
| Noncontrolling interests |
| 117 |
| — |
| Total equity |
| 217,608 |
| 201,136 |
| Total liabilities, redeemable noncontrolling interest, and equity |
| $ |
| 1,016,553 |
| $ |
| 941,313 |
HCI GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(Dollar amounts in thousands, except per share amounts)
| Three Months Ended |
| March 31, |
| 2021 |
| 2020 |
| Revenue |
| Gross premiums earned |
| $ |
| 130,942 |
| $ |
| 92,365 |
| Premiums ceded |
| (43,099 |
| ) |
| (30,719 |
| ) |
| Net premiums earned |
| 87,843 |
| 61,646 |
| Net investment income (loss) |
| 4,594 |
| (192 |
| ) |
| Net realized investment gains (losses) |
| 1,113 |
| (2,244 |
| ) |
| Net unrealized investment losses |
| (269 |
| ) |
| (4,805 |
| ) |
| Credit losses on investments |
| — |
| (439 |
| ) |
| Policy fee income |
| 970 |
| 829 |
| Other |
| 623 |
| 585 |
| Total revenue |
| 94,874 |
| 55,380 |
| Expenses |
| Losses and loss adjustment expenses |
| 45,751 |
| 28,078 |
| Policy acquisition and other underwriting expenses |
| 23,065 |
| 11,826 |
| General and administrative personnel expenses |
| 9,650 |
| 8,367 |
| Interest expense |
| 2,079 |
| 2,970 |
| Other operating expenses |
| 4,227 |
| 3,482 |
| Total expenses |
| 84,772 |
| 54,723 |
| Income before income taxes |
| 10,102 |
| 657 |
| Income tax expense |
| 3,257 |
| 110 |
| Net income |
| 6,845 |
| 547 |
| Net income attributable to redeemable noncontrolling interest |
| (794 |
| ) |
| — |
| Net loss attributable to noncontrolling interests |
| 97 |
| — |
| Net income attributable to HCI |
| $ |
| 6,148 |
| $ |
| 547 |
| Basic earnings per share |
| $ |
| 0.82 |
| $ |
| 0.07 |
| Diluted earnings per share |
| $ |
| 0.75 |
| $ |
| 0.07 |
| Dividends per share |
| $ |
| 0.40 |
| $ |
| 0.40 |
HCI GROUP, INC. AND SUBSIDIARIES
(Amounts in thousands, except per share amounts)
A summary of the numerator and denominator of basic and diluted income per common share calculated in accordance with GAAP is presented below.
| Three Months Ended |
| Three Months Ended |
| GAAP |
| March 31, 2021 |
| March 31, 2020 |
| Income |
| Shares (a) |
| Per Share |
| Income |
| Shares (a) |
| Per Share |
| (Numerator) |
| (Denominator) |
| Amount |
| (Numerator) |
| (Denominator) |
| Amount |
| Net income attributable to HCI |
| $ |
| 6,148 |
| $ |
| 547 |
| Less: Income attributable to participating securities |
| (18 |
| ) |
| (13 |
| ) |
| Basic Earnings Per Share: |
| Income allocated to common stockholders |
| 6,130 |
| 7,474 |
| $ |
| 0.82 |
| 534 |
| 7,369 |
| $ |
| 0.07 |
| Effect of Dilutive Securities: |
| Stock options |
| — |
| 96 |
| — |
| 9 |
| Convertible senior notes (b) |
| 1,312 |
| 2,288 |
| — |
| — |
| Warrants |
| — |
| 72 |
| — |
| — |
| Diluted Earnings Per Share: |
| Income available to common stockholders and assumed conversions |
| $ |
| 7,442 |
| 9,930 |
| $ |
| 0.75 |
| $ |
| 534 |
| 7,378 |
| $ |
| 0.07 |
| (a) Shares in thousands. |
| (b) For the three months ended March 31, 2020, convertible senior notes were excluded due to their anti-dilutive effect. |
Non-GAAP Financial Measures
Adjusted net income is a Non-GAAP financial measure that removes from net income the effect of unrealized gains or losses on equity securities required to be included in results of operations in accordance with Accounting Standards Codification 321. HCI Group believes net income without the effect of volatility in equity prices more accurately depicts operating results. This financial measurement is not recognized in accordance with accounting principles generally accepted in the United States of America ("GAAP") and should not be viewed as an alternative to GAAP measures of performance. A reconciliation of GAAP net income to Non-GAAP Adjusted net income and GAAP diluted earnings per share to Non-GAAP Adjusted diluted earnings per share is provided below.
Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income
| Three Months Ended |
| Three Months Ended |
| March 31, 2021 |
| March 31, 2020 |
| GAAP Net income attributable to HCI |
| $ |
| 6,148 |
| $ |
| 547 |
| Net unrealized investment losses (gains) |
| $ |
| 269 |
| $ |
| 4,805 |
| Less: Tax effect at 24.52182% |
| $ |
| (66 |
| ) |
| $ |
| (1,178 |
| ) |
| Net adjustment to Net income |
| $ |
| 203 |
| $ |
| 3,627 |
| Non-GAAP Adjusted Net income |
| $ |
| 6,351 |
| $ |
| 4,174 |
HCI GROUP, INC. AND SUBSIDIARIES
(Amounts in thousands, except per share amounts)
A summary of the numerator and denominator of the basic and diluted income per common share calculated with the Non-GAAP financial measure Adjusted net income is presented below.
| Three Months Ended |
| Three Months Ended |
| Non-GAAP |
| March 31, 2021 |
| March 31, 2020 |
| Income |
| Shares (a) |
| Per Share |
| Income |
| Shares (a) |
| Per Share |
| (Numerator) |
| (Denominator) |
| Amount |
| (Numerator) |
| (Denominator) |
| Amount |
| Adjusted net income attributable to HCI (non-GAAP) |
| $ |
| 6,351 |
| $ |
| 4,174 |
| Less: Income attributable to participating securities |
| (31 |
| ) |
| (200 |
| ) |
| Basic Earnings Per Share before unrealized gains/losses on equity securities: |
| Income allocated to common stockholders |
| 6,320 |
| 7,474 |
| $ |
| 0.85 |
| 3,974 |
| 7,369 |
| $ |
| 0.54 |
| Effect of Dilutive Securities: |
| Stock options |
| — |
| 96 |
| — |
| 9 |
| Convertible senior notes (b) |
| 1,312 |
| 2,288 |
| — |
| — |
| Warrants |
| — |
| 72 |
| — |
| — |
| Diluted Earnings Per Share before unrealized gains/losses on equity securities: |
| Income available to common stockholders and assumed conversions |
| $ |
| 7,632 |
| 9,930 |
| $ |
| 0.77 |
| $ |
| 3,974 |
| 7,378 |
| $ |
| 0.54 |
| (a) Shares in thousands. |
| (b) For the three months ended March 31, 2020, convertible senior notes were excluded due to their anti-dilutive effect. |
Reconciliation of GAAP Diluted EPS to Non-GAAP Adjusted Diluted EPS
| Three Months Ended |
| Three Months Ended |
| March 31, 2021 |
| March 31, 2020 |
| GAAP diluted Earnings Per Share |
| $ |
| 0.75 |
| $ |
| 0.07 |
| Net unrealized investment losses (gains) |
| $ |
| 0.03 |
| $ |
| 0.65 |
| Less: Tax effect at 24.52182% |
| $ |
| (0.01 |
| ) |
| $ |
| (0.18 |
| ) |
| Net adjustment to GAAP diluted EPS |
| $ |
| 0.02 |
| $ |
| 0.47 |
| Non-GAAP Adjusted diluted EPS |
| $ |
| 0.77 |
| $ |
| 0.54 |